Superior Technology Solutions, Inc. v. Rozenholc

In this attorney malpractice action, defendant David Rozenholc ("Rozenholc") moves to dismiss plaintiffs' complaint pursuant to CPLR 3211(a)(1), (5) and (7) on the grounds that: (1) plaintiffs are barred from bringing the instant action pursuant to the law of the case doctrine and other estoppel theories; (2) plaintiffs have failed to plead a cognizable cause of action for legal malpractice; and (3) documentary evidence provides a complete defense to plaintiffs' claims. Plaintiffs Superior Technology Solutions ("Superior") and Jong S. Lee ("Lee") oppose the motion, which is denied for the reasons below.

Background

Lee is the sole owner, President, chairman, and chief executive officer of Superior, which is a computers sales and services business. In 2002, Lee contracted with 110 West 31st Street Realty Corporation ("the landlord") to lease space for commercial use on the first floor, second floor and basement of the four-story building located at 110 West 31st Street, New York, NY ("the building") on behalf of Superior's predecessor, Advanced Access Systems, Inc. The lease commenced in 2002 and ended in 2005. On January 25, 2005, Lee negotiated and executed a second lease on behalf of Superior, commencing on February 1, 2005 and ending on January 31, 2011. The 2002 and 2005 leases contained identical renewal clauses, in the rider to the lease, stating, "Tenant shall have the option to renew this lease for an additional four-year (4) term (the "Renewal Term").. .Said option shall be exercised by notice ("Tenant's Notice") to Landlord not less than four (4) months prior to the expiration of the initial five year term and time shall be of the essence as to the date of the Tenant's Notice." The lease also set forth a notice provision stating that "[a]ny notices or demands, which under the terms of the lease...must be given or made to the parties [thereto] in order to be effective shall be in writing and shall be given or made by mailing the same by registered or certified mail..."

On September 11, 2007, plaintiffs retained Rozenholc on a contingency basis to represent them in any action in connection with various issues arising out of their relationship with the landlord. Specifically, the retainer agreement executed between plaintiffs and Rozenholc on that date states:

This is to confirm the terms upon which this law firm has been retained to represent you in connection with your landlord's attempt to terminate your tenancy. Our services will include representing you in any action brought by your landlord to terminate your lease and in any action brought by you in order to protect your tenancy. In addition, we will represent you in negotiations with your landlord or successor-landlord.

Rozenholc maintains that he was not retained to handle, nor asked to handle any transactional dealings of the plaintiffs with the landlord, and that he never functioned as plaintiffs' transaction counsel.

Around the time Rozenholc was retained, a developer, . 855 Realty Owner LLC ("855Realty"), expressed interest in purchasing the building as part of a group of parcels, which would form a major development project. The landlord and 855 Realty signed a contract of sale dated October 29, 2007.

On or about February 1, 2008, the landlord served plaintiffs with a 10-Day Notice to Cure in an alleged attempt to empty the building for the sale to 855 Realty. The landlord alleged that Lee was in default under the terms of the lease for entering a sublease of the premise without prior written consent from the landlord and for refusing access to the basement of the premise to conduct borings necessary to preserve the walls and structures of the premise.

On or about February 15, 2008, Rozenholc commenced a Yellowstone action on behalf of plaintiffs against the landlord in response to the 10-day Notice to Cure. Rozenholc filed an Order to Show Cause in New York Supreme Court (Index No. 102569/08), seeking a temporary restraining order and preliminary injunction, enjoining the landlord from terminating plaintiffs' lease and tolling their time to cure any alleged violations of the tenancy under the lease.

On August 20, 2008, Justice Marylin Diamond granted the Yellowstone injunction. After the injunction was granted, Rozenholc allegedly used it as leverage to negotiate a buyout for plaintiffs, wherein the proposed developer of the building would pay plaintiffs to relinquish their leasehold rights and vacate the premises. The rights were not set to expire until January 2011, or if renewed, January 2015. Plaintiffs were orally offered $4 million, which plaintiffs rejected in September 2008. In his affidavit, Lee states that the offer was rejected after numerous meetings and conversations between him and Rosenholc and that Rosenholc "believed he could secure [plaintiffs] a more lucrative buy-out arrangement which would include the cost of relocating [plaintiffs'] business." (Lee Aff. at 2).

855 Realty did not go forward with the development as a result of financial difficulties and changes in the real estate market. In November 2008, a foreclosure action was commenced against 855 Realty by its lender, iStar FM Loans LLC.

On January 26, 2010, Rozenholc negotiated for the landlord to enter a stipulation agreement in which he agreed to withdraw the notice of default and to release $50, 000 that had been held in escrow as a condition of granting the temporary restraining order. Following the resolution of the Yellowstone action, Rozenholc alleges he had very limited involvement ...

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